• The net long USD position rose to $34bn; however as opposed to a long USD market, a more accurate description is a short EUR and short JPY market; as most other positions are relatively flat – with the exception of a building long AUD position.
• Traders are bullish and hold net long positions in all the commodity currencies; however the building AUD position is most notable as it now stands at $5bn. Bullish sentiment is likely on the back of a slow fundamental improvement combined with heavy EURAUD and EURCAD selling as well as triple -A seeking flows; AUD’s build is likely partially due to its favourable yield. For CAD and NZD, the bias is bullish, but sentiment is likely more neutral than this implies.
• Positioning ahead of this week’s ECB meeting highlights a fundamentally- driven re-acceleration in bearish sentiment, with a build in the net short position to $26.5bn closing in on the record $33.6bn from June 2012.
• JPY sentiment continues to deteriorate as investors contrast diverging paths in policy between the BoJ and the Fed. Shorts now outnumber longs nearly 9:1, providing for some vulnerability, however we note that positioning has ample room to build before reaching the $17.2bn position from late December 2013.
Read the full report: FX Research